Industrial growth appears to be on the verge of strong revival

It is entirely possible that the index, which is largely a volume-based measure, may be underestimating value-added in the form of quality improvements.

Quick estimates of industrial growth for June actually suggest strong revival of growth in the offing that is investment-led and focused on producer goods. And to keep up the momentum, the Centre needs to chalk out proactive policy to boost manufacturing in such high-growth potential sectors as telecom equipment and silicon chip fabrication plants. True, overall industrial production has risen by a lacklustre 3.4 per cent (over that in June last year). And manufactures, which have over 75 per cent weight in the industrial index, have posted a lowly 1.8 per cent growth. However, it is entirely possible that the index, which is largely a volume-based measure, may be underestimating value-added in the form of quality improvements.

Besides, disaggregated figures in the index reveal a positive trend. Capital goods production has surged 23 per cent, no doubt aided by a marked upsurge in particular segments like electrical machinery, which has posted a phenomenal 69.2 per cent rise in output. It is true that the seeming uptick in capital goods output is on a very low base, and lumpy equipment, which may take several months to produce, can periodically lead to spikes in output. However, the figures do reveal that capital goods output during April-June has gone up by a credible 13.9 per cent. And first-quarter company results do seem to corroborate turnaround performance quite across the board.

Note also that the latest industrial figures show that electricity output, with over 10 per cent weight in the index, has revved up a commendable 15.7 per cent. It may well have shored up output in services, but we have no way of knowing by how much as the Central Statistics Office does not put out figures pertaining to a regular index of services output. The industrial index itself needs to be revamped, for instance, by having value-based measures for long-gestation goods so as to smoothen the production curve. More important, instead of the dated year-on-year measure, we do need month-on-month figures as is the global norm, seasonally adjusted, to keep better track of the industrial economy. Expect solid recovery.